Thinking about an Outside Sales Person

[Craig]

Were finally getting to the point where we are looking at the outside sales person option. We have been lucky enough for the last 44 years to have all our customers come to us, but can see the advantage of having that person outside as well.

Here is my question:
How are most sales commissions figured? What works well and what doesn't?

 

[oxburger]

I've heard of starting a sales rep on a salary for a certain time period until they build a client base and then reducing the salary gradually while increasing the commission base from 1% of the sales to say 5-6% of sales. For example, start them with a salary of $50K and have it set for 6-9 months while they build their clients and then gradually reduce over a period of another 6-9 months. Then after this period, they would need to be selling roughly 830K annually to get the $50K they were getting when they started (assuming a commission of 6%)

 

[Coolio]

Craig,
There are as many ways to pay a rep as there are ways to put ink on paper.
Everything is negotiable. Where I work (and have worked in the past) we have a system similar to what oxburger describes and it works ok. One thing we are looking at is a value added based commission. The higher the value added, the higher the commission paid. Keeps the bottom feeders from bringing in the wrong kind of work.

The real issue is finding the right rep that has the contacts to sell items in "your" sweet spot. My last company brought in a high end rep that sold only web work. (At the time we were only sheetfed). He failed and after 6 months, left for greener pastures. He couldn't transition his customer base or sales mentality to a sheetfed environment. Similar situation with a digital rep (thiswas 10-15 years ago). We knew we had to go there but didn't have the equipment to support the rep. Different outcome as that rep was able to shift into sheetfed mode until the company got the right equipment. He is still there selling to this day.

Short answer, use oxburger's method but be flexible. And I hope you find the right rep.
Good luck.

Greg

 

[Craig]

Thanks for the advice... much appreciated!

 

[rbailleu]

I have heard of people also using something similar to value added. but they paid out more commission on more profitable jobs. not just extra opperations that add value.

 

[Coolio]

I have heard of people also using something similar to value added. but they paid out more commission on more profitable jobs. not just extra opperations that add value.

Most MIS systems out there will calculate a value added percentage. This is based on the whole job selling price. You would have to do some calculating to determine your target number. For awhile, our target was 66%. If a rep sold a job for less, say 63%, his commission was decreased from 6% to 4% (Hypothetical numbers). If he sold a job with a value added under 55%, no commission...

It puts ownership on the rep to sell the right kind of work that is profitable for you.

Again, you would have to determine your targets and breaks.

Good luck

 

[OutSourceD]

We pay our sales force $10 hr salary. Because some jobs are more profitable than others the commission rate varies from 1% - 7%.

 

[Rohypnol]

Craig,
There are as many ways to pay a rep as there are ways to put ink on paper.
Everything is negotiable.

The real issue is finding the right rep that has the contacts to sell items in "your" sweet spot.

And I hope you find the right rep.
Good luck.

Greg

Agree with Greg, trying to find a good honest rep will be hard.
Monitoring them is even harder.
Don't over pay them which will make them not hungry enough to go out and get more work in, they can get to comfortable.

Most of the work that they bring in won't pay for their coffee or fuel for the week.
They are good at filling in their expense forms thou........which are better and their job brief's.

Teams of Account Managers are the way forward to look after your customers